LIFE SCIENCE SUPPLY CHAIN SOLUTIONS BY STEVE CLARKE

Challenge

As reported in last week’s newsletter, a current BioSupply life science client has several inventory control challenges: ·      Inventory record accuracy at about 66%·      ERP system not configured to track inventory at detailed location level·      Excess and obsolete inventory that has accumulated over several years·      Inventory in aisles, offices and trailers·      Expected 50% inventory increase within next 12 months due to growth

Solution

In summary, we simply want to be able to store more active stuff in the warehouse and be able to find it. The first step will be to hold a kaizen event next week to identify, consolidate, and remove excess and obsolete (E&O) inventory. Once we remove the E&O inventory, we can see how much space has been created. It is important to note that we do not intend to scrap any inventory during the kaizen event since it is unclear which inventory must be retained to support obsolete instruments at customer sites. By not scrapping inventory, we were able to be less conservative in our E&O criteria, knowing that we could retrieve the inventory if we found a need for it. We selected the following criteria: Excess

• More than 2 years’ worth of inventory on hand based upon the greater of recent monthly usage or future monthly MRP demand

Obsolete

• No usage in past 6 months, AND
• No MRP demand

 Once the criteria were defined, inventory and usage data were exported from the ERP system to quantify how much E&O inventory was currently in the warehouse (see results section).

Testimonial

“Excellent with lean manufacturing and kaizen.”

– Roy Hendricks, Senior Buyer

Results

Based upon the criteria and data exported from the ERP system, we estimated that about 43% of items in the warehouse are either obsolete or have more than 2 years on hand (see table below): Category                                              % total itemsObsolete items                                    24%Items with excess inventory                  19%Total                                                   43% This will make a dramatic difference to the warehouse, by removing unproductive inventory. The hope is that by the end of the kaizen, there will be no more inventory in aisles, offices or trailers. Next StepsAlthough this is an important first step, there are also several other activities required to meet our goals: 1.    Redesign the layout to maximize utilization of vertical and floorspace2.    Acquire racking and material handling equipment3.    Track inventory at the detailed location level4.    Perform “wall-to-wall” physical inventory count5.    Train employees to perform inventory transactions6.    Implement a robust cycle count program to maintain accurate inventory recorder Look for next week’s newsletter to find out how the kaizen is progressing.